What's going on?

Major stock indexes might�ve flown over record highs in November, but investment bank BNY Mellon says stock markets could be feeling a little worse for wear by the end of the year (tweet this).

What does this mean?

Double-digit returns within the space of a month are rare for stock markets, but that�s exactly what�the Stoxx 600 Europe index � which comprises 90% of the value of European stock markets � did in November, banking a record-breaking 14% rise. It even outperformed the major US indexes � and this in a month where the S&P 500 reached new highs and the Dow Jones Industrial Average posted its biggest monthly jump since 1987.


Cue Christmas Grinch BNY Mellon, which thinks stocks could drop up to 7% before the year ends. And it�s not alone: other analysts have�argued that the size and speed of the recent rally suggests stock markets probably don�t have much further to go this year.

Why should I care?

For markets: Blessings in disguise.

BNY Mellon thinks the drop could actually work in investors� favor and represent a good time to buy into some new stocks. The investment bank�s still optimistic for the future, after all: it reckons that once Europe and the US have limped through next quarter�s lingering coronavirus effects, a stock market recovery should kick off in the second quarter of 2021.

The bigger picture: It�s cyclicals� time to shine.

This year�s US stock market rallies have generally been caused by a handful of Big Tech names, but this latest move higher has instead been driven by �cyclicals�: stocks that are sensitive to the economy and tend to do well when a recovery�s on the cards. That explains why European stock markets � which aren�t particularly tech-heavy � outperformed their American rivals, and why the rally�s benefiting a bigger selection of companies: 467 stocks in the main US stock market rose in November � the most since April.